AFME is pleased to circulate its European High Yield and Leveraged Loan quarterly data report for the second quarter of 2024. The report provides detailed data and analysis on the issuance and credit performance for the high yield and leveraged loan markets.
Among the main findings of this report:
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European leveraged finance issuance (leveraged loans and high yield bonds) reached €120bn in proceeds in 2024 Q2, a 60% increase compared to the previous year. The positive trend is due to a stable environment with lower interest rates and tighter spreads, signaling a shift between public and private markets.
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High yield bond issuance totaled €47.4bn in Q2 2024, a 137% increase from Q2 2023, showing a full recover after the pandemic drop of issuances.
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High yield bond proceeds were mainly used for recapitalization (77% of the total), or for repayment of debt and refinancing (12.6% of the total), and general corporate purposes (9.24%). While no proceeds were allocated to leveraged buyouts (LBOs) and M&A in the first quarter of the year, in 2024 Q2 a small amount of high yield instruments were used to finance these activities.
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As in the previous quarter, the 62.1% of the high yield market by outstanding amount is represented by the financials, consumer discretionary, and communications sectors.
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Leveraged loan origination stood at €72.8bn, a decrease compared to the previous quarter (€88.5bn), but a 33% YoY increase from Q2 2023.
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Institutional spreads (3-month rolling average) showed consistent stability compared to the previous quarter, reaching 395bps in June 2024. Pro-rata spreads consistently remained below institutional spreads, and have dropped from 332bps in April 2024 to 292bps in June 2024.
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The Healthcare sector continues to lead by loan origination amount, while the computers & electronics has significantly grown in the latest quarter and, together with Professional Services, represented 40% of the Q2 2024 issued amount.
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Credit Quality: S&P reported the trailing 12-month speculative-grade bond default rate at 4.6% in June 2024, up from the 4.1% reported in March. Conversely, Moody’s and Fitch reported a rate of 3.5% and 3.6% respectively, relatively unchanged from the previous quarter's value.